The banking sector has been largely stagnant for many years, with several of the world’s largest banks still relying on outmoded technologies. But blockchain technology could be about to hugely impact the traditional banking sector, bringing in systems to benefit both banks and the consumer.
On this page, we’ll look at five ways traditional banks can benefit from blockchain-based technologies.
Blockchain can be used to implement exceptionally fast transactions from one crypto wallet to another. These transactions can be requested, approved, and logged almost instantaneously, making them marginally faster than current methods used by major banks. International payments, which will be an increasing feature of banking as the world gets smaller, can be considerably quickened by using blockchain technology.
A decentralised ledger gives banks the ability to bypass several stages of infrastructure, therefore accelerating the speed of payments. For example, many transactions are currently facilitated using centralised SWIFT protocol, which sends payment orders before the money is then processed through several intermediaries. Using a blockchain eliminates the need for a system like SWIFT and can settle transactions almost immediately.
Security is key when it comes to online banking. Shared ledgers allow banks to keep information safer than ever. Traditional database management systems can be vulnerable to the various new techniques being used by scammers, but blockchain can offer a higher level of protection. This is thanks to the various security features that can be built in, including cryptographic encryption and the fact that mutual consensus is required for any data to be altered. Digital bank cards can also be issued, offering far more layers of security than standard bank cards.
It's also the case that banks can increase the security of documents, not just money. By storing important documentation on blockchain, such as mortgage agreements, you can be assured that the information contained within them can’t be accessed or manipulated. Blockchain also ensures documents remain secure when being transferred.
According to research by Juniper Research, banks stand to slash the cost of international payments by $10bn by 2030, simply by adopting blockchain technology.
But how will blockchain technology reduce fees? Well, bank infrastructure costs can be cut by an exceptional amount – up to 30%, according to Accenture. Costs of maintaining the many levels of banking required to currently facilitate transactions will naturally be lowered as fewer levels are required.
While banks can reduce costs, users will be able to earn money by staking crypto. This will support the blockchain, as well as attract customers.
Increased transparency in the banking sector is something many have been calling for, and this can be achieved using blockchain technology. This is because it’s incredibly simple to trace data on a blockchain when compared to methods currently used by traditional banks.
For example, imagine a government is investigating insider trading. Using current methods, it can be close to impossible to find payment origins. But with blockchain, all data can be traced easily and won’t have been manipulated in any way.
Democratisation of Finance
Nowadays, people want more control than ever of their data. But this isn’t always possible, as middlemen must be engaged to manage data, which takes time and is prone to mistakes.
With blockchain, users will gain control over their data, allowing them to view and manage the data without having to go through others. With more control over data comes increased confidence in the banking system.
The rise of blockchain technology is exceptionally exciting for the banking sector. Using blockchain will allow faster transactions and lower costs, plus will make the entire banking sector far more transparent.
At Kuna.Tech, we provide blockchain solutions for a variety of clients, including those in the banking industry. Contact us today to see how we can help your business accept crypto payments and implement blockchain technology.